JPMorgan US Smaller Companies Investment Trust (JUSC) aims to provide investors with capital growth through a portfolio of US smaller companies.
Don San Jose is the lead manager of the trust, supported by co-managers Dan Percella and Jon Brachle. Together they employ an active stock picking approach, looking for high-quality businesses that can perform strongly regardless of market conditions. Despite the focus on quality the managers will not overpay for growth, and a great deal of emphasis is placed on establishing the correct valuation.
Currently the portfolio is comprised of 92 companies. The focus on quality has led the managers to concentrate on the larger end of the small-cap universe. The trust has limited exposure to technology and healthcare, unlike the majority of US trusts, and instead favours the likes of producer durables and consumer discretionary.
JUSC has an exceptional track record relative to both peers and the benchmark Russell 2000 Index, outperforming the benchmark in nine of the past ten years. In fact the managers stand out for their alpha generation, compared to peers in both the large-cap and small-cap AIC North American sectors.
The trust is currently trading at a historically wide discount of 11.8%, in contrast to its one year average discount of 3.9%.
JUSC is currently trading at a discount of 11.8%, and there have rarely been more attractive entry points into the trust in our view. Of course there are number of uncertainties surrounding global markets including the US. However we believe that the focus on high-quality companies, many with defensive characteristics, should mean that the trust will hold up relatively well if we see the markets impacted by a second wave of COVID-19.
The trust has an excellent track record for outperformance. During the bull markets of 2016 and 2019 the trust outperformed the benchmark considerably, generating an outperformance of 5.5% and 5.4% respectively relative to the benchmark. In the falling markets of 2018 and 2020, however, they were still within 0.3% of the benchmark.
|Excellent track record of alpha generation relative to both its North American peer groups||Macroeconomic uncertainty surrounds the US|
|High-quality and valuation-led investment approach should be beneficial in an uncertain economic environment||Little-to-no income for investors|
|Attractive discount compared to historical average||Gearing can exacerbate the downside (as well as amplify returns on the upside)|